Cenvat credit for explosives used in mines outside factory premises was upheld under the continuing Modvat principle.

Explosives used in mines for extracting limestone were held eligible as inputs for Cenvat credit even though they were consumed outside the factory premises. The Court relied on the principle approved in Jaypee Rewa Cement and reaffirmed in Vikram Cement that inputs used outside the factory can still qualify where the Cenvat scheme continues the Modvat position. On that basis, the Tribunal's allowance of credit was consistent with the governing law, and the revenue's challenge failed.

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Issues: Whether explosives used in mines for extracting limestone, though not used within the factory premises, were eligible as inputs for availing Cenvat credit under the relevant excise rules.

Analysis: The Court noted that the Supreme Court had initially held in Jaypee Rewa Cement that inputs used outside the factory premises could still qualify for Modvat credit. It then noted that the earlier contrary view in J.K. Udaipur Udyog Ltd. was reconsidered by a three-judge Bench in Vikram Cement, which approved the Jaypee Rewa Cement principle and held that the Cenvat scheme continued the Modvat position. On that basis, the Tribunal's view in favour of credit was found consistent with the governing law.

Conclusion: The explosives were eligible inputs for Cenvat credit even though they were used in mines outside the factory premises, and the revenue's challenge failed.

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